Acquisitions and Divestitures

9 Months Ended

Sep. 30, 2011

Acquisitions and Divestitures [Abstract]

ACQUISITIONS AND DIVESTITURES

2. ACQUISITIONS AND DIVESTITURES

2011 Activity

     During the first nine months of 2011 Apache completed $493 million of oil and gas property acquisitions and $202 million of oil and gas property sales. In addition, the Company has entered into the following material transactions:

Kitimat LNG Project

     In 2010 Apache Canada Ltd. (Apache Canada) and EOG Resources Canada, Inc. (EOG Canada), through their subsidiaries, purchased 51-percent and 49-percent interests, respectively, in a planned liquefied natural gas (LNG) export terminal (Kitimat LNG facility) and 25.5-percent and 24.5-percent interests, respectively, in Pacific Trail Pipelines Limited Partnership (PTP), a partnership that owns a related proposed pipeline. In February 2011, in order to align ownership and interests on the planned facility and pipeline development, Apache Canada and EOG Canada agreed to purchase Pacific Northern Gas Ltd.’s (PNG) remaining interest in PTP for $50 million. Following the close of the acquisition, Apache Canada and EOG Canada owned 51-percent and 49-percent interests, respectively, in PTP and secured full ownership in the proposed pipeline to transport natural gas from production areas to the Kitimat LNG facility. Under the terms of the agreement, PNG will operate and maintain the pipeline under a seven-year agreement with provisions for five-year renewals.

     In March 2011, Apache Canada and EOG Canada announced that Encana Corporation agreed to purchase a 30-percent working interest ownership in both the Kitimat LNG facility and PTP. Under the new ownership agreement, Apache Canada retained a 40-percent interest in both the facility and the related pipeline while EOG Canada retained a 30-percent interest.

ExxonMobil United Kingdom North Sea Asset Acquisition

     On September 21, 2011, Apache announced an agreement to acquire assets from Exxon Mobil Corporation’s U.K. subsidiary, Mobil North Sea LLC, for $1.75 billion. The fields have net production of approximately 19,000 barrels of oil and natural gas liquids and 58 million cubic feet of natural gas per day. At year-end 2010, estimated proved reserves totaled 68 million barrels of oil equivalent. The assets to be acquired include: operated interests in the Beryl, Nevis, Nevis South, Skene and Buckland fields; operated interest in the Beryl/Brae gas pipeline and the SAGE gas plant; non-operated interests in the Maclure, Scott and Telford fields; and Benbecula (west of Shetlands) exploration acreage.

     The transaction is projected to close by year-end 2011 with an effective date of January 1, 2011. The acquisition is subject to regulatory approvals in the United Kingdom (U.K.). The Company expects to fund this transaction at closing with cash.

2010 Activity

     During 2010 Apache completed the following material transactions:

Gulf of Mexico Shelf Acquisition

     In June 2010 Apache completed an acquisition of oil and gas assets on the Gulf of Mexico shelf from Devon Energy Corporation (Devon) for $1.05 billion, subject to normal post-closing adjustments. The acquisition was effective January 1, 2010, and was funded primarily from existing cash balances.

BP Acquisitions

     In July 2010 Apache entered into three definitive purchase and sale agreements to acquire properties from subsidiaries of BP plc (collectively referred to as “BP”) for aggregate consideration of $7.0 billion. The effective date of the transactions was July 1, 2010. The acquisition of BP’s oil and gas operations, related infrastructure and acreage in the Permian Basin of west Texas and New Mexico was completed on August 10, 2010, for an agreed-upon purchase price of $3.1 billion. Apache completed the acquisition of substantially all of BP’s western Canadian upstream natural gas assets on October 8, 2010, for $3.25 billion. On November 4, 2010, the Company completed the acquisition of BP’s interests in four development licenses and one exploration concession in the Western Desert of Egypt for $650 million. Preferential purchase rights for $658 million of the value of the Permian Basin properties were exercised, and accordingly, the aggregate purchase price for all three transactions was reduced to approximately $6.4 billion, subject to normal post-closing adjustments.

     The acquisitions were funded with a combination of common stock, mandatory convertible preferred shares, new term debt, commercial paper and existing cash balances.

Mariner Energy, Inc. Merger

     In November 2010 Apache acquired Mariner Energy, Inc. (Mariner), an independent exploration and production company, in a stock and cash transaction totaling $2.7 billion and assumed approximately $1.7 billion of Mariner’s debt. Mariner’s oil and gas properties are primarily located in the Gulf of Mexico deepwater and shelf, the Permian Basin and onshore in the Gulf Coast region. The transaction was accounted for using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. Certain assets and liabilities may be adjusted as additional information is obtained, but no later than one year from the acquisition date.

Pro Forma Impact of Acquisitions (Unaudited)

     The Devon and BP Permian acquisitions were completed during the second and third quarters of 2010 respectively. The remaining BP acquisitions and Mariner merger were completed subsequent to the third quarter of 2010. The following table presents pro forma information for Apache as if the acquisitions and merger occurred prior to January 1, 2010:

	For the Quarter		For the Nine Months
	Ended September 30,		Ended September 30,
	2010		2010
	(In millions)
Revenues and Other	$	3,447	$	10,241
Net Income	$	812	$	2,542
Preferred Stock Dividends		19		57
Income Attributable to Common Stock		793		2,485
Net Income per Common Share — Basic	$	2.08	$	6.52
Net Income per Common Share — Diluted	$	2.02	$	6.41

     Apache’s historical financial information was adjusted to give effect to the pro forma events that were directly attributable to the acquisitions and merger and were factually supportable. The unaudited pro forma consolidated results are not necessarily indicative of what the Company’s consolidated results of operations actually would have been had the acquisitions and merger been completed prior to January 1, 2010. In addition, the unaudited pro forma consolidated results do not purport to project the future results of operations of the combined company. Adjustments and assumptions made for this pro forma calculation are consistent with those used in the Company’s annual pro forma information as more fully described in Note 2 of the financial statements in Apache’s Amended Annual Report on Form 10-K/A for its 2010 fiscal year.